Paper #1897

Título:

The macroeconomics of irreversibility

Autores:

Isaac Baley y Andres Blanco

Fecha:

Diciembre 2024

Resumen:

We study aggregate capital dynamics in an investment model with idiosyncratic productivity shocks, fixed capital adjustment costs, and irreversibility driven by a wedge between capital purchase and resale prices. We derive sufficient statistics capturing the role of investment frictions on aggregate capital fluctuations, measure these statistics with investment microdata, and exploit them to discipline the capital price wedge. Irreversibility doubles the persistence of capital fluctuations and is crucial for reconciling micro-level investment behavior with macroeconomic propagation.

Palabras clave:

investment frictions, capital price wedge, irreversibility, lumpiness, fixed adjustment costs, capital misallocation, Tobin’s q, transitional dynamics, inaction, propagation.

Códigos JEL:

D30, D80, E20, E30

Área de investigación:

Macroeconomía y Economía Internacional

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